The definition of capital goods has undergone a substantial change in the revised GST Law. The definition of capital goods under revised GST Law is given under section 2(19) which states that capital goods means goods, the value of which is capitalised in the books of accounts of the person claiming the credit and which are used or intended to be used in the course or furtherance of business.

As contrast to the above definition, the definition of capital goods under earlier GST law was similar to that given under Cenvat Credit Rules, 2004. The earlier definition was very specific as compared to the present definition which has a very wide scope. As seamless credit is proposed under GST regime, the definition given under revised law is appreciated and welcomed. According to the revised GST Law, goods that are capitalised in the books of accounts will be considered as capital goods. This will have the effect that certain goods will be considered as inputs even when they are used with capital goods if the said goods are not capitalised in the books of accounts. Although, there will be less impact as except for pipelines and telecommunication towers, full credit is available for all goods including capital goods. However, goods that are used with capital goods but are not capitalised will have effect in following situations:-

1. The provisions regarding payment of amount on supply of used capital goods will not apply for such goods. In case of supply of capital goods or plant and machinery on which input tax credit has been taken, the registered taxable person shall pay an amount equal to the input tax credit taken on the said capital goods or plant and machinery reduced by percentage points as prescribed or transaction value of capital goods whichever is higher.

2. There is different time period specified for job work of inputs and capital goods. In case of job work of inputs, the time limit for receipt of goods by the principal is specified as one year while in case of job work of capital goods, the time limit for receipt of capital goods by the principal is specified as three years. If the goods are not capitalised, lesser time as applicable in case of inputs would be relevant.

It appears that the credit availment on capital goods is dependant on the accounting treatment done by assessee. If the goods are not capitalised, the credit will be available as inputs and provisions pertaining to inputs will apply. However, non-capitalisation of goods in books of accounts will also lead to loss of claim of depreciation by the assessee.